NIPPON EXPRESS HOLDINGS,INC. FY2026 Q2 Earnings Report

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Executive Summary

This quarter marked an increase in revenue and profit, primarily driven by SG&A efficiency improvements, with profitability clearly improving. Revenue was ¥13,566.1B (+6.7% YoY), Operating Income was ¥448.0B (+56.7%), Profit Before Tax was ¥373.6B (+75.7%), and Net Income attributable to owners of the parent was ¥242.8B (+186.8%). The Operating Income margin improved by +105bp from 2.25% to 3.30%, while the gross margin declined by -74bp from 9.1% to 8.4%. A notable characteristic is that the primary driver of profit growth was the decline in the SG&A ratio (6.6%→4.9%).

Factors Affecting Results

【Revenue】Revenue increased to ¥13,566.1B (+6.7% YoY). By segment, Europe (¥2,939.2B, +20.4%), South Asia and Oceania (¥784.9B, +28.2%), and Heavy Haulage and Construction (¥267.5B, +16.8%) led growth, while DistributionSupport (¥1,538.8B, -9.0%) posted a decline in revenue. Japan (¥6,252.1B, +3.2%), the major domestic business, accounts for approximately 46% of the revenue mix and remains the core of company-wide revenue.

【Profit and Loss】Operating Income rose sharply to ¥448.0B (+56.7% YoY). The primary driver of the increase was the decline in the SG&A ratio (-168bp), which more than offset the decline in the gross margin (-74bp). Financial expenses of ¥108.1B and equity-method losses of -¥22.9B weighed on Profit Before Tax, while income taxes of ¥119.8B (effective tax rate: 32.1%) remained broadly at the same level as the previous year. Consequently, Net Income expanded significantly to ¥242.8B (+186.8% YoY). The company is in a phase of earnings improvement led by cost discipline, characterized by increases in both revenue and profit.

Segment Analysis

The core Japan business recorded revenue of ¥6,252.1B (+3.2%), Operating Income of ¥278.2B (+44.3%), and a 4.4% margin, posting substantial profit growth and serving as the center of company-wide earnings. Heavy Haulage and Construction generated revenue of ¥267.5B (+16.8%) and Operating Income of ¥37.9B (+62.7%), with a margin of 14.2%, the highest profitability among all segments. South Asia and Oceania achieved both high growth and strong earnings expansion, with revenue of ¥784.9B (+28.2%) and Operating Income of ¥42.5B (+116.3%). In contrast, TheAmericas recorded revenue of only ¥611.2B (+0.9%), while Operating Income declined to ¥20.5B (-41.0%), resulting in a lower margin of 3.4%. Although DistributionSupport revenue declined by 9.0%, Operating Income increased by 26.6% to ¥94.4B, confirming a margin improvement to 6.1% through efficiency gains.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.3%, the Net Income margin was 1.8%, and ROE was 3.0% (based on company disclosures). Against a gross margin of 8.4% (down -74bp from 9.1% in the previous year), the SG&A ratio improved to 4.9% (from 6.6% in the previous year, an improvement of -168bp), contributing +105bp to the Operating Income margin. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥760.3B, approximately 3.1 times Net Income of ¥242.8B, indicating strong cash backing for earnings. 【Investment Efficiency】Financial expenses of ¥108.1B were recorded against Profit Before Tax of ¥373.6B, resulting in an interest coverage ratio of approximately 3.5x and indicating that the burden of capital costs remains substantial. 【Financial Soundness】The Equity Ratio was 35.5% (improving from 34.3% in the previous year), while cash and cash equivalents stood at ¥2,234.6B, maintaining a reasonable capital buffer.

Cash Flow Analysis

Operating Cash Flow was ¥760.3B, down -14.1% YoY, but remained approximately 3.1 times Net Income of ¥242.8B, indicating strong cash backing for earnings. In terms of working capital, inventories of -¥18.7B, trade receivables of -¥26.6B, and trade payables of -¥201.1B represented total cash outflow factors of approximately ¥246B. However, these were sufficiently absorbed relative to the OCF subtotal of ¥1,117.9B. Investing Cash Flow was -¥289.9B, primarily attributable to capital expenditures of -¥292.6B. As this remained within the range of OCF, Free Cash Flow reached ¥470.4B. Financing Cash Flow showed a substantial outflow of -¥1,105.7B, with lease payments of -¥737.9B as the largest factor. Together with dividend payments of -¥121.2B and share repurchases of -¥152.4B, these were sufficiently covered by Free Cash Flow even after shareholder returns.

Earnings Quality

The primary driver of earnings was an improvement in recurring Operating Income. Other income of ¥103.6B and other expenses of ¥100.4B were almost fully offset on a net basis, and the impact of one-time factors appears limited. The difference between Profit Before Tax of ¥373.6B and Net Income of ¥242.8B was primarily attributable to income taxes of ¥119.8B (effective tax rate: 32.1%), with no significant distortion from non-recurring factors. Meanwhile, equity-method losses continued at -¥22.9B, slightly weighing on earnings quality. The fact that OCF was approximately 3.1 times Net Income indicates good accrual quality, and the disclosed earnings level is reasonably supported by cash flow.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥27,500B, Operating Income of ¥1,200B (+133.1% YoY), EPS of ¥289.50, and a dividend of ¥100.00. The earnings forecast was revised during the current quarter. While the Q2 cumulative progress rate for revenue was 49.3%, a standard level, progress rates for Operating Income and Net Income were 37.3% and 34.7%, respectively, both lagging behind the full-year plan. The first half appears to have been weighed down by the decline in the gross margin and the burden of financial expenses and equity-method losses. Achievement of the full-year targets will depend on price and mix improvements and growth in overseas segments during the second half.

Shareholder Returns

The Q2 dividend was ¥50 per share, and the full-year dividend forecast remains unchanged at ¥100 (with no revision to the dividend forecast). The Payout Ratio (dividends only, based on Net Income attributable to owners of the parent) is approximately 50%, calculated using dividend payments of ¥121.2B against Net Income of ¥242.8B. Share repurchases of ¥152.4B were conducted, resulting in a Total Return Ratio of approximately 58% when dividends and share repurchases are combined, relative to Free Cash Flow of ¥470.4B. Based on OCF and cash on hand of ¥2,234.6B, the funding capacity supporting this level of shareholder returns is secured.

Risk Factors

1. Interest Rate and Refinancing Risk: Bonds and borrowings due within one year (current liabilities) increased to ¥1,036.8B, up +74.2% from ¥595.1B in the previous year. Financial expenses of ¥108.1B represent a considerable burden relative to Profit Before Tax of ¥373.6B, making short-term debt refinancing trends a key monitoring point.

2. Structurally Low Profitability: The gross margin of 8.4% (down -74pt from 9.1% in the previous year) and the Operating Income margin of 3.3% are both at low levels, suggesting limited resilience to fluctuations in prices and costs such as fuel and labor. By region, variation between segments is substantial, including a -41.0% decline in Operating Income at TheAmericas.

3. Continued Equity-Method Investment Losses: Equity-method income/loss was negative at -¥22.9B, and the performance of affiliated companies will remain an ongoing factor requiring close monitoring as a driver of Net Income volatility.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (transport)

Profitability and Returns

Comparative data against the industry median for the company’s profitability indicators is not yet available; therefore, the discussion is limited to absolute levels.

Growth and Capital Efficiency

Revenue growth was +6.7%, but its relative position within the industry is difficult to assess due to limitations in the median data.

※Source: Company compilation

Key Takeaways from the Earnings Results

1. The Operating Income margin improved by +105bp to 3.3% from 2.25% in the previous year, but the improvement was primarily attributable to the decline in the SG&A ratio (-168bp), while the gross margin decreased by -74bp. The earnings data indicates that profit growth was driven by cost efficiencies.

2. Progress against the full-year plan was 49.3% for revenue, compared with 37.3% for Operating Income and 34.7% for Net Income, indicating that earnings are lagging and confirming a plan structure weighted toward the second half.

3. OCF was approximately 3.1 times Net Income, and Free Cash Flow of ¥470.4B sufficiently covered shareholder returns consisting of dividends and share repurchases. Meanwhile, short-term interest-bearing debt increased by +74.2% YoY, making changes in the funding structure an important financial monitoring point.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson type, with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥3,346–¥3,543 at ±1% for the cost of equity, and ¥3,441–¥3,443 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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